April inflation seen muted despite fuel hike

OTTAWA (Reuters) - High-flying gasoline prices have left
Canadian consumers feeling like their living costs are spinning
out of control, but an April inflation report will likely prove
them wrong with rates staying at lows seen in March.

Statistics Canada will release the April inflation numbers
on Wednesday at 7 a.m. (1000 GMT).

Markets expect the consumer price index to rise 0.5 percent
in April for an annual inflation rate of 1.4 percent, according
to the median forecast of 22 analysts in a Reuters poll.

They see the core inflation rate, which strips out gasoline
and a handful of other volatile items, climbing 0.2 percent on
the month but matching March's annual rate of 1.3 percent,
which was the lowest since July 2005.

Inflation below its 2 percent target makes it easier for
the Bank of Canada to follow through with a promise to cut
interest rates again. Market players expect that to happen on
June 10 with a quarter-point cut in the overnight rate to 2.75
percent.

"Not only are we not seeing an upward spike in inflation
due to the supposed run-up in food prices and gasoline prices
but inflation is actually going the other way," said Doug
Porter, deputy chief economist at BMO Capital Markets.

Porter, who penned a note last week lashing out at what he
called "a drumbeat of scare stories" in the media about rising
prices and a faltering economy, said people fuming about prices
at the pump would likely be skeptical about the good news story
on inflation.

"It's probably going to lead to that old question: 'does
the CPI lie?"'
Continued...